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TEI Issues Policy Statements Regarding the Sales Taxation of Business Inputs, Trailing Nexus, and the Confidentiality of Taxpayer Information

On August 25, 2017, TEI issued new policy statements regarding the Sales Taxation of Business Inputs, Sales Tax Filing Requirements After Nexus Ceases (Trailing Nexus), and the Public Disclosure of Confidential Taxpayer Information.

The Sales Taxation of Business Inputs policy statement notes that retail sales taxes are designed to tax final consumption. Businesses are not the ultimate consumers of goods and services they purchase. TEI therefore opposes the application of sales taxes to business inputs, as imposing sales taxes on business inputs increases consumer prices by imposing multiple instances of taxation as goods and services move through the supply chain. This disguises the true tax burden on goods and services and distorts consumer and business choices about which inputs to purchase, where to locate jobs and investments, and how to organize their business structures.

The Trailing Nexus policy statement notes that taxpayers have a duty to pay taxes that are owed and have the right not to pay more than is owed. TEI maintains jurisdictions should not impose sales tax filing requirements on vendors beyond the end of the month they cease to have nexus with a jurisdiction, with the exception of reporting adjustments related to sales taking place prior to and during the month nexus terminates. The reporting of such adjustments should be limited to the three months following the termination month, at which time the taxpayer should be permitted to designate the return as its final return and close its account.

This policy statement on the Public Disclosure of Confidential Information notes that maintaining the confidentiality of taxpayer information is critical to the functioning of a tax system based upon voluntary compliance. TEI maintains all state and local tax jurisdictions should adopt and respect privacy and confidentiality principles similar to the federal confidentiality rules governing the disclosure of taxpayer information. The disclosure and publication of confidential taxpayer information violates taxpayer privacy without providing any material benefit to state and local tax jurisdictions. Jurisdictions should instead use aggregate taxpayer information to evaluate whether existing tax laws provide good corporate tax policy.

TEI's policy statements reflect TEI's position on important administrative and procedural issues, and facilitate advocacy by providing formal position papers TEI's members can use when communicating with taxing agencies. Other policy statements generated by the Committee can be accessed on the State and Local Tax Committee's page.

The policy statements were prepared under the aegis of TEI's State and Local Tax Committee, whose chair is Marji Gordon-Brown. State and Local Tax Committee members Angela Pitale, Roger Sponseller, and Jamie Fenwick coordinating the drafting of the policy statements with TEI Tax Counsel, Pilar Mata.